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Interpersonal factors

as Drivers of Quality and

Performance in

Western– Hong Kong Interorganizational Business Relationships

RESEARCH METHODOLOGY Scope of Research The investigation analyzes business relationships between

Western exporting firms from the United States, Canada,

Great Britain, Ireland, Australia, and New Zealand and

importers located in Hong Kong, a special administrative

region of China. Hong Kong represents a suitable location

for this type of research for three major reasons: (1)

although Hong Kong may have been exten-sively exposed

to Western business practices after many decades of British

colonial rule, Chinese cultural values and traditions are

nonetheless deeply rooted in the ways that business is

conducted and society operates at large among the

indigenous Chinese people (Tam and Redding 1993; Tse et

al. 1988); (2) since the transfer of the administration of Hong

Kong from the United Kingdom to China in 1997, Hong

Kong’s role in developing trade with the mainland has risen

dramatically, with many Hong Kong distributors/agents now

spending signifi-cantly greater amounts of time on the

mainland negoti-ating deals on behalf of their principal

suppliers (Wang, Siu, and Barnes 2008); and (3) due to

Hong Kong’s his-torical Anglicized ties and geographic

location, the mar-ket is often regarded as a gateway for

many Western firms to enter China and beyond (Feenstra

and Hanson 2004).9

These characteristics make

collaboration with Hong Kong trading firms particularly

attractive to West-ern firms seeking business success in the

region.

Sampling Frame The population of firms for this study was identified

from the Hong Kong Directory (Hong Kong Trade

Development Council 2006). This directory comprises

100,000 companies, of which 44,896 are actively

engaged in import. Of these importers, we randomly

selected a sample of 500 firms that were purchasing

goods from Western manufacturers. The nature of the

importing activities of these firms was diverse, ranging

from electronics and digital entertainment products to

garments and textiles. Each firm was precontacted by

phone to assess its eligibility for inclusion, identify

appropriate key informants, and secure participation in

the study. The key informant was a person within the

importing firm whose main responsibility was dealing

with people in the Western exporting organization.10

The outcome of this process was that 267 firms (i.e.,

53.4%) agreed to take part in the survey. Some of the

reasons cited for nonparticipation were lack of

available time, absence of the key informant from the

office, and ceasing of business operations.

Fieldwork Procedures Respondents had the option of answering either a Chi-

nese or an English version of the questionnaire. Follow-

ing three waves of reminders, 208 questionnaires (an

overall 41.6% response rate) were eventually collected

over a six-month period. We removed 6 questionnaires

due to incomplete or missing data, leaving 202 retained

for the analysis. To control for the existence of nonre-

sponse bias, we followed Mentzer and Flint’s (1997) rec-

ommendations: we randomly identified nine items per-

taining to each of the key constructs contained in the

questionnaire, and we telephoned a group of 30 ran-

domly selected nonrespondents to provide answers to

each of these items. We then compared their responses

with those gathered from actual respondents using a t-

test; they revealed no statistically significant differences.

Scale Development We identified appropriate scales for the focal constructs

after a careful review of the pertinent buyer–seller liter-

ature (see the Appendix). However, the scales for the

three interpersonal constructs—sijiao, xinyong, and

ganging—were, to a great extent, self-developed in this

study because there was limited previous research

exam-ining them.11

We measured interorganizational

trust with an eight-item scale adapted from Doney and

Can-non (1997). Cooperation comprised five items

derived from Leonidou, Palihawadana, and Theodosiou

(2006). We used a four-item scale developed by Gilliland

and Bello (2002) to measure commitment. We

operational-ized the construct of satisfaction in line with

six items employed in Cannon and Perrault’s (1999)

study. We measured financial performance on a five-item

scale extracted from Lee, Yang, and Graham (2006).12

We verified the face validity of our scales using the

opinions of three academic experts who had extensive

experience in the field. The scales were further refined

on the basis of insights gained from informal discussions

with a group of Hong Kong–based Chinese managers.

Research Instrument The questionnaire had a structured format and con-

sisted of three sections. The first part included questions

relating to the background and history of the working

relationship. To eliminate potential selection bias per-

taining to the business relationship in question, each

respondent was asked to focus his or her response on

the fourth-most-significant relationship with a Western

exporting firm in terms of business volume (Anderson

32 Journal of International Marketing

and Narus 1990; Bello and Gilliland 1997). The second

section focused on the key constructs in question and

consisted of a series of statements referring to the spe-

cific relationship with the Western exporter, measured on

seven-point Likert scales (1 = “strongly disagree,” and 7

= “strongly agree”). The final part included orga-

nizational demographic questions and further particu-lars

relating to the key informant. To avoid possible key

informant bias, we incorporated a set of questions into

the end of the questionnaire measuring the familiarity,

knowledge, and confidence of the respondent in answer-

ing questions relating to the relationship with the West-

ern supplier (Cannon and Perreault 1999). The ques-

tionnaire was initially developed in English and then

translated into Chinese. To achieve linguistic equiva-

lency, the instrument was later back-translated into Eng-

lish and adjusted accordingly. The questionnaire was

pretested with ten trading companies in Hong Kong, and

we made minor changes to improve its flow and

workability.

STUDY FINDINGS To test the hypothesized associations among constructs in the conceptual model, we adopted

structural equation modeling (SEM) and employed a

confirmatory model-ing strategy whereby the fit of the

conceptual model was considered.13

The analysis is

divided into three parts: the first provides the results of the measurement model, the second highlights the

findings derived from the structural model, and the

third presents the results of the moderation analysis.

Measurement Model To assess the validity and reliability of the measurement

scales, we conducted a series of tests. First, all scales

were initially purified through item-to-total correlation and

exploratory factor analytical procedures (Gerbing and

Anderson 1988). We excluded items that exhibited a low

item-to-total correlation or high cross-loadings. We then

used the remaining items for confirmatory fac-tor

analysis. As Table 1 shows, although the chi-square

statistic was significant (2

= 1,172.88, d.f. = 542, p = .000), all other indices revealed an acceptable model

fit (2/d.f. = 2.16; normed fit index [NFI] = .95; non-

normed fit index [NNFI] = .97; comparative fit index [CFI] = .97; root mean square error of approximation [RMSEA] = .07). All items loaded significantly on their designated constructs, providing evidence of conver-gence validity (Anderson and Gerbing 1988).

We assessed discriminant validity in two ways. First, we

observed that the confidence interval around the corre-

lation estimate 2

standard errors) for each pair of con-

structs examined never included 1.0 (Anderson and

Gerbing 1988), thus providing preliminary evidence

regarding the discriminant validity of the constructs (see

the correlation matrix in Table 2). Second, following the

more stringent procedures Fornell and Larcker (1981)

propose, the average variance extracted (AVE) for every

latent construct had to be greater than the squared latent

correlation of that construct’s measure with the measures

of all other constructs in the model. All vari-ance

extracted estimates compared favorably with the

corresponding squared correlations, thus satisfying the

criterion for discriminant validity. To assess the possibility of common method bias, we

administered three complementary tests. The first employed

Harman’s single-factor test, whereby all indica-tors

incorporated in the structural model were included in a

principal components analysis (Podsakoff and Organ 1986).

Using a Varimax rotation, we extracted the num-ber of

factors necessary to account for the variance in the

variables from the unrotated factor solution. Eight factors

emerged with eigenvalues greater than 1.0, accounting for

73% of the variance, while no general factor was evident.

Second, we estimated a confirmatory factor analysis model

in which we restricted all indicators included in the structural

model to load on a single factor (Venkatraman 1990). A

worse fit for the one-factor model from the measurement

model would suggest that common method bias does not

pose a serious threat (Olson, Slater, and Hult 2005). The fit

indices obtained from this analysis indicated a poor model fit

(2

(1,080) = 7,307.43, p < .000;

2/d.f. = 6.77; NFI = .78; NNFI = .80; CFI = .81;

RMSEA = .17). Finally, we administered a third test fol-

lowing Lindell and Whitney’s (2001) partial correlation

technique, in which a marker variable (i.e., a construct

theoretically unrelated to the other constructs in the

model) is highlighted in advance, so there is an a priori

justification for predicting a zero correlation. For our

study, we chose the firm’s importing experience (i.e., the

number of years the firm has been purchasing from

abroad) to serve as a marker variable (rM). To conduct

this test, we computed the common method variance

(CMV)–adjusted correlation between the variables under

investigation using the formulas provided by Malhotra,

Kim, and Patil (2006). We identified no significant corre-

lations between the marker variable and any of the

study’s constructs, and the differences between the origi-

nal and the CMV-adjusted correlations were small and

not significantly different at p < .05. We can safely con-

Interpersonal Factors as Drivers of Quality and Performance 33

clude that CMV does not seem to be a problem in this

study. We addressed construct reliability by estimating com-

posite reliability scores, the Cronbach’s alpha coeffi-

cient, and the AVE. The composite reliability for all the

factors ranged from .75 to .90, exceeding the threshold

level of .60 (Hair et al. 2006). Cronbach’s alpha coeffi-

cients ranged between .79 and .95, well above the .70

cutoff point (Nunnally and Bernstein 1994). In addition,

the AVEs for each construct ranged from .51 to .61,

which are also within acceptable levels, in that they cap-

ture more than half the variance in their observable

measures (Bagozzi and Yi 1988). These results indicate

a reliable measurement of the theoretical constructs as

elements of the structural model.

Structural Model We tested the hypothesized links between the constructs

by estimating the structural model, using the elliptical

reweighted least squares (ERLS) technique.14

The

analy-sis revealed a good structural model fit, as

demonstrated by the ratio of chi-square to the degrees of

freedom (2

/d.f. = 2.47) and the results of the alternative

fit indices employed (NFI = .94; NNFI = .96; CFI = .96;

RMSEA = .08). The R-square for each major dependent

construct was 68% for trust, 84% for relationship qual-ity

(a higher-order construct), and 65% for financial

performance. These figures point to a strong explana-

tion of the dependent variables by their hypothesized

independent variables. Table 3 presents the standardized

path coefficients together with the corresponding t-values of

the structural model.15

Importantly, all the hypotheses

examined were statistically significant and in the

hypothesized direction.16

As we predicted, all three interpersonal factors were

confirmed to be conducive to the development of

interorganizational trust in Western exporter–Hong Kong

importer working relationships. Specifically, we found

trust to be positively affected by sijiao ( = .29, t = 3.61, p

= .00), xinyong ( = .21, t = 3.43, p = .00), and ganqing (

= .51, t = 6.09, p = .00), thus confirming H1, H2, and H3,

respectively. This means that Western man-ufacturers

must first have good personal relations with

representatives of their Hong Kong counterparts if they

want to establish trustful working relationships at the firm

level. The findings also support prior research on the

importance of interpersonal relations as a critical

precondition to cultivating sound interorganizational

relationships (e.g., Lee and Dawes 2005; Ramström

2008; Wang 2007). In line with previous research in a Western context

(Ganesan 1994; Geyskens, Steenkamp, and Kumar

1998; Leonidou, Palihawadana, and Theodosiou 2006),

we found that trust positively affected relationship qual-ity

(which was a higher-order construct comprising

cooperation, commitment, and satisfaction), thus con-

firming H4 ( =.92, t = 9.63, p = .00). This finding also

underscores the central role of trust among the Chinese

Interpersonal Factors as Drivers of Quality and Performance 35

. in achieving harmonious, healthy, and lasting working

relationships among business organizations (Yau et

al. 2000). Thus, trust is a behavioral trait that is highly

appreciated by both Western and Chinese managers

as the heart of any business relationship and, as

such, must be systematically cultivated and carefully

preserved (Gu, Hung, and Tse 2008). Finally, we found relationship quality to be a statisti-

cally significant predictor of financial performance ( =

.81, t = 8.70, p = .00), thus providing support for H5.

This validates previous theoretical arguments and

empirical findings that working with cooperative, com-

mitted, and satisfied parties is conducive to achieving

productive, rewarding, and effective results that

improve financial performance (Anderson and Narus

1991; Chu and Fang 2006). This is particularly crucial

in international buyer–seller relationships, whose

chances of financial success are already limited due

to high environmental turbulence and competitive

inten-sity (Leonidou 1999).

Moderation Analysis We employed multigroup analysis to test the moderating

effects depicted in H6–H9. For this purpose, we divided

the data into two groups (i.e., small vs. large importer

size, U.K. vs. non-U.K. supplier origin, low vs. high rela-

tionship age, and proactive vs. reactive relationship ini-

tiation) and two models: (1) a free model, in which we

allowed all parameter estimates to vary between the two

groups, and (2) a restricted model, in which we imposed

an equality constraint on the hypothesized moderated

link between the two groups (see Table 4, Panels A–D).

A moderation effect is evident if a significant chi-

square difference (2(1) > 2.71, p < .10) emerges.

With regard to importer size, the results suggest that there is a moderating effect on the sijiao and trust link

(2(1) = 4.80, p < .10) because this link becomes

stronger when the importer is small ( = .56, t = 4.92,

p = .00), in support of H6a. We also obtained similar

results for the xinyong–trust link (2(1) = 4.00, p <

.10), where, again, smaller importers demonstrated stronger effects ( = .33, t = 3.05, p = .00), thus

confirm-ing H6b. However, we found no moderating effects in the case of importer size influencing the

association between ganqing and trust (2(1) = .26, p

> .10), which does not support H6c . We found exporter’s origin to significantly moderate the

association between each of the three interpersonal

dimensions and trust (p < .10), and thus, we accept H7a–c. Specifically, there were stronger effects on the paths between sijiao and trust ( = .37, t = 3.35, p = .00), between xinyong and trust ( = .25, t = 3.10, p = .00), and between ganqing and trust ( = .80, t = 4.69,

p = .00) when Hong Kong importers dealt with U.K.

exporters, as opposed to other Western suppliers. The age of the relationship between the Hong Kong firm and the Western export supplier was the third moderat-ing variable. Our results show that this variable signifi-cantly influenced two paths—namely, those of sijiao with

trust (2

(1) = 9.52, p < .10) and ganqing with trust

(2

(1) = 2.91, p <. 10). In both cases, the effect was

stronger when the relationship was longer, in sup-port of

H8a ( = .85, t = 4.00, p = .00) and H8c ( = .56,

t = 5.90, p = .00). However, we must reject H8b (2

(1) = .23, p > .10), despite the finding that the effect of xin-

yong on trust was also significant ( = .20, t = 2.73, p = .00) among Hong Kong importers that had long rela-

tionships with Western exporters. Finally, with regard to relationship initiation, our mod-eration analysis confirmed that a proactive initiation of the working relationship with the Western supplier by the Hong Kong importer strengthens the link between sijiao

and trust (2

(1) = 4.58, p < .10) and between xinyong

and trust (2

(1) = 2.76, p < .10), thus confirm-ing H9a

and H9b. Notably, we found both paths to be statistically

significant (at p < .00) in the “proactive ini-tiation” group but nonsignificant in the “reactive initia-tion” group. We

rejected H9c because we found no sig-nificant

differences between proactive and reactive relationship

initiation (2

(1) = .78, p > .10). CONCLUSIONS AND IMPLICATIONS This research has substantially demonstrated that, in a

Chinese context, a key prerequisite for the development

of successful interorganizational relationships is the

prevalence of healthy interpersonal relations. The open

communication between people from the interacting

organizations, the gradual gaining of personal credibil-ity,

and the cultivation of personal affection are para-mount

in building trust at the organizational level. In general, we

found that this effect of interpersonal fac-tors on

interorganizational trust became stronger when (1) the Hong Kong importer was smaller rather than

larger, (2) the foreign supplier was of U.K. origin rather

than from other Western countries, (3) the relationship

has existed for a longer as opposed to a shorter period,

and (4) the initiation of the relationship was proactively

rather than reactively established. We also found that

high levels of trust improved relationship quality at the

interorganizational level, which in turn is conducive to

better financial performance. Although economic interests are of strategic importance in

both Chinese and Western societies, research has sug-

gested that social and personal links must be in place

initially for business to prevail. Our findings reiterate the

importance of understanding different cultures in

international business and advocate the notion that building

effective interpersonal relations with Chinese managers can

help achieve the benefits that such long-term business can

bring. Western firms are therefore encouraged to take note

and focus on these dimensions

to strengthen their business relations with the Chinese

community overall.17

This study has helped increase our explanatory leverage

in international marketing research on theoretical,

methodological, and empirical grounds. Theoretically,

although prior buyer–seller literature has examined some

of the associations among the constructs (e.g., Anderson

and Narus 1990; Armstrong and Yee 2001; Morgan and

Hunt 1994), the constructs had not yet been assembled

in an integrated model, as we propose in this

investigation. Most importantly, our study success-fully

connects interpersonal relationship attributes with

interorganizational relationship constructs across coun-

tries. It also extends its contribution by demonstrating the

impact of these behavioral interactions on financial

performance. Methodologically, our model has success-

fully transferred theories, concepts, and ideas developed

in domestic buyer–seller relationships to an interna-tional

platform, following the example of previous stud-ies (e.g.,

Ding 1997; Kim and Oh 2002). We have also assembled,

combined, and successfully tested three important

interpersonal constructs for their positive effects on

enhancing interfirm relational exchanges. Such

interpersonal attributes have only received scant

attention among business scholars in previous research.

Empirically, although there has been an increasing vol-

ume of publications on doing business in a Chinese set-

ting in the past decade, there is a dearth of empirical

research focusing on the behavioral aspects of the work-

ing relationship involving Western–Chinese exchange

parties. The particular context of this investigation with

Hong Kong Chinese trading firms is critical, bearing in

mind the importance of Hong Kong as a gateway for

Western firms entering China and the significant growth

in trade to and from the mainland since Hong Kong’s

handover to China in 1997. Managerial Implications Our findings tend to support the prevailing view that the

Chinese often initially assess their interpersonal rela-

tionships with others quite early and then try to judge

whether they can be incorporated into their business

strategies and goals (Ambler, Styles, and Xiucun 1999;

Mavondo and Rodrigo 2001). At a conceptual level, we

observe a proven significant linkage between such inter-

personal dimensions and trust at the company level.

Exporters are therefore strongly encouraged to bear

these factors in mind and initially work on developing

such interpersonal nuances—sijiao, xinyong, and gan-

qing—as facilitators for building organizational trust,

38 Journal of International Marketing

rather than hastily promoting the company at the first

opportunity. Inexperienced exporters, particularly

those with little cultural understanding of and insights

about doing business with the Chinese, would be well

advised to employ or draw on personnel with

appropriate inter-personal skills to better manage and

facilitate such inter-national relationships. For Western exporting companies with limited resources,

which often do not have the finances avail-able to

appoint such personnel, it is critical to maintain, rather

than rotate, existing personnel with key contacts in the

region for longer periods of time because it would be

constructive in cultivating personal relationships with

their Chinese counterparts. It is essential to facili-tate

greater interpersonal interaction between those involved

in managing the business relationship, thus facilitating

communication, developing credibility, and generating

attachment. Such attributes are critical for providing a

foundation on which interorganizational trust can develop

and the quality of the relationship can be improved.

When such trust is established, the Chi-nese are more

willing to commit the organizational resources, time, and

energy required to make the ven-ture successful. Our

findings do not imply that interper-sonal relations cease

to play an important role after the interfirm relationship

begins. On the contrary, face-to-face relations are used

to maintain harmony in the interorganizational

relationship through open-ended, constantly evolving

relational conduct. Although, when developing business relationships, inter-

personal connections may play a more important role in

a Chinese cultural context than organizational affilia-tions

or legal formalities, they take significant time, effort, and

resources to be developed (Lee and Xu 2001). Western

exporting firms must first help their personnel further

understand the idiosyncrasies of the Chinese cul-ture

through factual (e.g., books), analytical (e.g., case

studies), and experiential (e.g., field trips) training (Black

and Mendenhall 1991). The use of a cultural assimilator

could prove particularly useful in this respect because he

or she would expose the exporter’s personnel to different

business scenarios with potential Chinese customers

and help them improve their interpersonal skills. Govern-

ment export promotion schemes can subsidize these

training programs as well as organize trade visits or exhi-

bitions to China that would help build familiarity with the

personnel of local import buyers. A key observation of this study is the positive connec-tion

between relationship quality and financial perform-

ance. Although developing and cultivating relationships

with the Chinese represents a social investment that may

require a great deal of time and resources to develop,

the financial return may well justify the effort made.

West-ern managers should therefore be congenial,

patient, and flexible to facilitate the relationship-building

process with their Chinese counterparts. This is

particularly imperative now because rapid market

changes, increasing competitive pressures, and more

demanding end users make the formation and nurturing

of sound interfirm relationships necessary to achieve

competitive advantage and secure a foothold in the

lucrative Chinese market.

Research Implications Our study shows that constructs developed within the

more refined field of domestic business relationships

(e.g., trust, commitment, cooperation, satisfaction) can

be successfully transferred to an international business

setting. Of course, the role of cultural differences should

be taken into consideration in the application of these

constructs, especially if the analysis focuses on such

con-trasting cultural settings as those of Western

societies (low context) and China (high context) (Craig

and Doug asl 2005). In particular, the study reveals that

a buyer–seller relationship perspective can be a useful

tool in explaining company internationalization

phenomena (Leonidou 2003). For example, the Western

firm’s export advancement in China could be viewed as a

process of establishing, developing, and sustaining rela-

tionships with import buyers at both strategic and tacti-

cal levels. The degree of an exporter’s success in the

Chi-nese market will therefore largely depend on the

performance of its behavioral relationship with these

buyers. The link we identify between interpersonal relations and

interorganizational relationships provides a significant

research implication. In the relationship management

literature, there is often a tendency to examine interfirm

relationships in isolation from the interactions taking place

among people representing these organizations (Lee and

Dawes 2005). However, the nature of these interpersonal

interactions is of paramount importance in determining the

quality and outcomes of the working relationship at the

interfirm level. The study has also confirmed the central role

of trust in providing a bridge between relationships at the

interpersonal and interor-ganizational levels. Notably, similar

findings have also been reported in other business fields,

such as in the case of sales management, in which

researchers have found a Interpersonal Factors as Drivers of Quality and Performance 39

salesperson’s trust to be conducive to organizational

trust (Doney and Cannon 1997). This study also brings to the surface three relatively

unknown constructs to the Western literature—namely,

sijiao, xinyong, and ganqing—which are particularly crucial

in building interpersonal relations in a Chinese context.

Despite their importance, these constructs have only

received scant and isolated empirical attention among

academics, and thus, their instrumental role in laying the

foundation to successfully develop interorga-nizational

trust between buyers and sellers has been ignored. Our

study has also ascertained the repeatedly cited existence

of a positive association between trust and the various

dimensions of relationship quality. Our findings are also

in line with the findings of other studies examining cross-

border buyer–seller relationships (Arm-strong and Yee

2001; Kim and Oh 2002). With regard to performance, the study shows that the

financial success of the business venture between West-

ern exporters and Chinese import buyers is dependent

on high levels of interorganizational relationship qual-ity,

expressed in terms of commitment, cooperation, and

satisfaction (LaBahn and Harich 1997). Thus, financial

performance in international (as well as domestic) mar-

kets is not an end in itself, but financial success can be

achieved if the interacting parties pay more attention to

the quality of their relationship. This finding provides

support to the notion that export (or import) business

performance depends not only on how well economic

elements (e.g., products, finance, promotion) are han-

dled but also on how the behavioral interactions (e.g.,

cooperation, commitment, satisfaction) with buyers (or

sellers) are managed (Evangelista 1996). Thus, research

on selling and buying organizations operating in inter-

national markets should focus not only on their transac-

tional associations but also on their collaborative inter-

actions.

LIMITATIONS AND FUTURE DIRECTIONS Although we selected Hong Kong as an ideal location for

this investigation, we realize that for some mainlan-ders,

Hong Kong is not a typical Chinese market. Fur-ther

research is therefore needed to extend the study by

drawing on a sample of trading firms in key areas of

China, such as Beijing, Shanghai, and Guangzhou.

Although currently there may be a greater tendency to

explore China directly through the mainland, for inex-

perienced firms and even for those with considerable

market knowledge, a Hong Kong company with experi-

ence in China is still likely to be valued as a supporting

mechanism for geographically disperse exporters. How-

ever, exporters must realize that appointing distributors

or agents in Hong Kong will come at a cost, and as China becomes increasingly market driven, it may be

more cost effective to work directly with buyers or

such trading firms on the mainland. Our research is also limited in terms of the cross-

sectional and self-reported measures that we adminis-

tered in this study. It would therefore be worthwhile to

undertake further longitudinal research to explore rela-

tionships between the constructs over time and try to

incorporate objective financial results. By drawing on a

data set of importing firms, the focus of the research

provides views from the buyers’ perspective alone; data

could also be collected from corresponding exporters to

analyze import–export dyadic relationships. In this way, it

would be possible to explore whether a common

understanding or relationship gap is evident between the

exchange parties, and such research might place

exporters in a better position to identify and remedy any

potential gaps that could harm the relationship’s long-

term potential. This study has been confined to the working relation-ship

between Hong Kong Chinese import buyers and their

Western exporters. However, Western multina-tional

corporations operating in the region are typically more

accustomed to such Chinese cultural nuances, and

therefore, we would expect a different handling of such

relationships with their local partners compared with

small to medium-sized exporters.18

Apart from investi-

gating these differences between Western exporting

firms and multinational corporations operating in the

Chinese market, it would be useful to also draw rela-

tionship comparisons with Chinese buyers among com-

panies adopting different modes of direct investment

(e.g., licensing, joint venturing, wholly owned produc-

tion) in this market. Such comparative analysis could

also be conducted between firms (either exporters or

multinationals) based in Western countries and those

headquartered in other high-context societies (e.g.,

Japan, South Korea, India). Finally, it would also be fruitful to incorporate into the

analysis various other constructs that shape interpersonal

relationships in a Chinese context, such as renqing (reci-

procated actions), mianzi/lien (face saving), and tiaohe

(harmony) (Wang 2007; Yen, Yu, and Barnes 2007). The

roles of other interorganizational constructs—such as

40 Journal of International Marketing

power, dependence, and adaptation—should also be

examined in conjunction with interpersonal factors. Of

particular usefulness is the construct of “shared values”

(Morgan and Hunt 1994), which might have a moder-

ating effect on the association between interpersonal and

interfirm factors. It is also important to explore the role of

various demographic characteristics of the busi-ness

relationship (e.g., relationship stage) in controlling

associations between the constructs of the model

(Dwyer, Schurr, and Oh 1987).

NOTES 1. Despite the recent recession of the global economy,

the impact on China has been milder than in Western

countries, with many experts claiming that its recov-

ery arrived sooner. Indeed, during the first half of

2014, China’s gross domestic product increased by

more than 7.3%, and production output experienced

growth of 8.7% (The Economist 2014).

2. There are idiosyncrasies in each country in the way

interpersonal relationships are conducted, ranging

from guanxi in China (i.e., using personal connec-

tions bounded by implicit psychological contracts to

maintain long-term relationships, mutual commit-

ments, loyalty, and obligation; Chen and Chen 2004),

to blat in Russia (i.e., tying together friends/

acquaintances in an intricate weave of favors and

counterfavors to facilitate access to products/services

that are in short supply; Sahlins 1972), to wasta in

Arab Gulf states (i.e., achieving goals through per-

sonal links, often derived from family relationships or

close friendships with key people in the society; Smith

et al. 2011). Thus, although the use of inter-personal

relationships is a universal phenomenon, the way it is

practiced in various regions is country specific (Gu,

Hung, and Tse 2008). As such, it is important to

understand these idiosyncrasies to more effectively

and efficiently handle them in a way that benefits

interfirm business interactions.

3. Certainly, the three interpersonal relationship attri -

butes used in our study (i.e., sijiao, xinyong, and

ganqing) are not the only ones that explain Chinese

interpersonal relationships. However, when we dis-

cussed these issues with a small sample of Hong

Kong–based business executives and academics dur-

ing an exploratory qualitative research stage, these

interpersonal relational dimensions were considered

critical in influencing the quality of business relation-

ships. Various publications focusing on Chinese

buyer–seller relationships have also confirmed the

importance of these dimensions (Leung et al.

2005; Shou et al. 2011), although in most cases,

they were discussed in isolation from one another. 4. Although after 150 years of British rule, Hong Kong

has developed into a sophisticated free market where

Western lifestyles have influenced the way business

is conducted, most of the indigenous population

adheres to traditional Chinese cultural values and

ethical standards when conducting business (Tam

and Redding 1993; Tse et al. 1988). Notably, most

Hong Kongers have adopted Chinese traditions, and

since the handover to China in 1997, more are

speaking Mandarin and have regular interactions with

people from the mainland.

5. Although guanxi is deeply rooted in Confucian phi-

losophy, which has influenced the societies of

many Asian countries, it is a unique sociological

phenome-non that stresses the role of personal

ties or social bonds in Chinese business ecology

(Xin and Pearce 1996). As such, it is applicable,

with minor varia-tions, in all countries influenced by

the Chinese culture—namely, mainland China (and

its special administrative region of Hong Kong),

Taiwan, and Singapore (Yeung and Tung 1996).

6. Despite variations in the way interpersonal relations

are conducted between Chinese and Westerners,

empirical research (e.g., McCrae and Costa 1997;

McCrae and John 1992) has shown the existence of

five personality traits (i.e., extroversion, agreeable-

ness, conscientiousness, neuroticism, and openness

to experience) that are universally applicable.

Although it is crucial to understand the role of these

personality traits in how interpersonal buyer–seller

relationships are conducted, this was beyond the

scope of the current investigation.

7. The Chinese judge the credibility of a person by eval-

uating the extent to which she keeps promises using

her past history and reputation (Leung et al. 2005).

This is of fundamental importance when initiating a

business relationship and must be established before

any transactions can take place (Hitt et al. 2000).

8. A person may trust an employee in a specific organ-

ization but distrust the organization overall, and vice

versa. Indeed, this is the essence of our thesis, in

which we examine how interpersonal factors (e.g.,

Interpersonal Factors as Drivers of Quality and Performance 41

personal credibility) affect trust at the

organizational level. In their study, Lee and Dawes

(2005) elaborate on the difference between

interpersonal trust and interorganizational trust. 9. Evidence has suggested that since Hong Kong’s

hand-over to Mainland China in 1997, the value of re-

exports has more than doubled (from HK$1.1 billion

in 1998 to HK$3.4 billion in 2012), with re-exports to

and from the mainland representing a significant

portion (Information Services Department 2013). 10. Although matched paired dyadic relationships

between import buyers and their foreign suppliers

could provide useful insights in the way behavioral

issues are perceived from different angles, the

exis-tence of great geographic, cultural, resource,

and other constraints involved in carrying out

research on a global scale makes such a task

difficult (Craig and Douglas 2005).

11. To establish a cross-cultural equivalency of the

scales used for sijiao, xinyong, and ganqing devel-

oped for our study, we contacted a small group of

import managers based in the nearby country of

Tai-wan and had a qualitative discussion with

them regarding our scales’ appropriateness. The

outcome of this discussion was that these scales

would also be applicable, without any

modification, in a Tai-wanese context.

12. Although it would be more appropriate to comple-

ment this subjective scale of financial performance

with more objective measures (e.g., sales, profits,

return on investment), such measures would be

dif-ficult to obtain from either private or public

sources. However, there is strong evidence in the

literature indicating that both objective and

subjective meas-ures of financial performance are

highly correlated (Dollinger and Golden 1992;

Powell 1992; Shoham 1998).

13. We used SEM analysis for three major reasons: (1) it

allows for assessment of relationships between the

constructs of the model in a comprehensive, system-

atic, and holistic manner; (2) it takes a confirmatory

rather than an exploratory approach to the data

analysis; and (3) it takes into account explicit esti-

mates of measurement error, whereby the fit of the

conceptual model is considered (Byrne 2006; Hair et

al. 2006).

14. The fact that our study employed Likert-type scales

indicates, by definition, that our data are not nor-

mally distributed. Indeed, the greater the variance in

the data, the closer the central tendency is to the

scale’s extreme points and the greater the possibility

for the data to violate the assumption of normality. Nevertheless, we checked for multivariate normality

in our data by examining the Mardia coefficient in our

measurement model. The value produced was

greater than 5, which suggests that the sample is

nonnormal (Bentler 2006). Mardia’s kappa coeffi-

cient, which gives an indication of nonnormality, was

.24, showing that although nonnormality was present

in the data set, it did not constitute a serious

problem. For this reason, we employed the ERLS

estimation technique, which assumes a multivariate

elliptical distribution, as opposed to a more general-

ized form of the multivariate normal distribution

assumed by the maximum likelihood estimation

procedure (Mohr and Sohi 1995). The reason for

using the former technique in our structural model is

justified in that the ERLS technique has been proved

to perform equally well with maximum like-lihood for

normal data and to be superior to other estimation

methods used for nonnormal data (Sharma,

Durvasula, and Dillon 1989).

15. We used the Lagrange-multiplier test in EQS to

uncover any additional paths that needed to be

added to our structural model. Notably, both uni-

variate and multivariate Lagrange-multiplier tests

revealed two additional significant paths (i.e., rela-

tionship quality trust and sijiao financial per-

formance) (2

> 3.84, d.f. = 1, p < .05). Although

changing the sequence of the trust–relationship

quality is not consistent with our conceptual devel-

opment, the results reveal a significant relationship

between the two factors ( = .72, t = 7.49, p < .01).

Similarly, a subsequent structural model revealed

that sijiao was a significant predictor of financial

performance ( = .22, t = 2.72, p < .01). However, in

both cases, there was significant deterioration in all

fit indices of the model. For this reason, we did not

include these paths in the final model.

16. We also reran SEM analysis using the CMV-

attenu-ated correlation matrix. The path results we

obtained were similar to those presented in our

main structural model, thus providing further credi-

bility that our original results were free of any CMV

effects.

42 Journal of International Marketing

17. By default, buyer–seller relationships imply a two-

way process, whereby both parties can either benefit

or lose from their interaction (Cunningham 1980;

Ford 2002). Thus, to have a win–win situation, it is

also essential for Chinese managers to understand

the Western approach of doing business and appro-

priately adjust their behavior, tolerance, and deci-

sions. Ultimately, both Western and Chinese firms

should be prepared from the beginning to make sac-

rifices, settlements, and compromises to ensure rela-

tionship continuity, prosperity, and success (Worm

and Frankestein 2000).

18. Whereas Western multinational firms operating in

the Chinese market often directly employ local peo-

ple who have familiarity with the local culture, most

small to medium-sized exporters tend to have a

much lower cultural understanding, due mostly to

their limited hands-on experience as a result of their

great geographical distance and infrequent visits to

the market. For these reasons, Western exporters

tend to rely more on their local import distributors/

agents for providing the necessary in-market feed-

back to help customize their offerings to local con-

ditions (Chee and Harris 1998).

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